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The News God > Blog > Business & Finance > The Main Advantages Of Becoming A Private Limited Company
Business & Finance

The Main Advantages Of Becoming A Private Limited Company

Rose Tillerson Bankson
Last updated: February 2, 2022 5:00 pm
Rose Tillerson Bankson - Editor
February 2, 2022
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The Main Advantages Of Becoming A Private Limited Company
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Starting your own business is an exciting time, but there are also some potential pitfalls that you need to be aware of. It really pays off to make sure you know what kind of business structure would best suit your needs before making the big step. It can have a big effect on your company if you don’t make the right choice. In the following article, we will have a look at some of the main advantages that come with starting a private limited company and how it can help you in growing your business into something that is going to be a success.

Contents
1. Legal Status2. Public Perception3. Financial Options4. Flexible Company Management5. Less Paperwork Than Other Structures

1. Legal Status

There’s a unique legal status that comes with this business structure. One of the main advantages of a private limited company is the fact that you get to enjoy limited liability, which means that if your business fails, only the amount invested in the company will be lost. You don’t have to put your personal assets at risk even if things go south. This creates a safe environment where you can rest assured that you won’t lose everything with just one bad decision. An LTD is a separate legal entity from you, which means that your personal assets can’t be touched. This is also known as a corporate veil. Perhaps something you might not have thought about, but it can become a big issue if your business runs into financial problems. If the company goes bankrupt, your home or car can be sold off by creditors in order to get the money owed. However, if you own an LTD, this can’t happen which can be very important for your peace of mind knowing that the business is separate from you and your private assets are safe even if something happens. Another advantage of the legal aspect is that, once the name of the company is registered, it can exist regardless of whether or not the original team is still around. It doesn’t what happens – your company will carry on as long as someone is willing to take over.

2. Public Perception

A lot of people are worried about public perception, and it can be a really big deal. Unless you are expecting to go big right from the start, then this might become an issue that affects your business quite badly. It’s all about image and making sure that your company is represented properly in the media. When you are a private limited company, you get to enjoy the same recognition as big corporations. People will know your name and start placing their trust in it because they see it’s a serious thing that is not going to go away anytime soon. This means that customers who relied on word-of-mouth or local recommendations will be more likely to try out your products and services. Having the three letters LTD on your business cards and letterheads can give you a leg-up in any situation and it might just be the thing that makes all the difference between success and failure.

3. Financial Options

When you are running a private limited company, you get access to many more financial options than if you were just an individual. There are numerous benefits that come with taking this type of business structure, all of which can be incredibly important when it comes to growing your business. In a lot of countries, LTDs pay less corporate tax than other companies. In some places, it can be as low as half of what a normal business would pay. Another obvious example is raising money for new projects or expansions through the stock market. If your company is successful, you might want to try listing it on the stock market (Initial Public Offering, or IPO). If this happens, you will be able to sell off some of the shares of your company in order to raise new capital which you can use for various purposes. Another example would be getting loans from banks – it’s much easier to get a new business loan if you have been running for a while, even if your company is relatively small. Banks are more likely to open up their pocketbooks because they trust the stability of LTDs and know that there’s no risk involved.

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4. Flexible Company Management

If you are the sole owner of a private limited company, it means that you get complete control over everything. You are able to make all the decisions when it comes to running your business, even if others might offer advice or try to convince you otherwise. The decision-making process is much easier because there isn’t anyone else involved besides you who can complicate matters. A great example of this would be the hiring process – you are able to make all the necessary decisions yourself, including who gets that amazing job you offered them. Of course, if you choose to do so, you can include as many people as you want in the decision-making process. The beauty of an LTD is that it doesn’t have a rigid internal structure. You can pretty much make it whatever you want it to be, and that is one of the best things about it.

5. Less Paperwork Than Other Structures

There is a lot of paperwork involved in running a business, regardless of how large or small it might be. The thing is that some types of businesses require a lot more documentation and red tape than others. Keeping proper records is essential for any business, but it’s much easier to do so if you are running a private limited company. For example, an LLP would need to have formal Annual Meetings where all the members get together and discuss things – this is not necessary for LTDs. You can pretty much do whatever you want without worrying about following strict rules and procedures that are required by other business structures.

5. Less Paperwork Than Other Structures

Running a private limited company is usually the best choice for anyone who wants to start a business. It gives you a lot of power and allows you to make more decisions on your own, without having to worry about what other people think. The future looks promising if you make the right choices from the beginning, so take some time to think about it and determine the best course of action for your business.

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